A giant euro sign is seen inside the headquarters of the European Central Bank in Frankfurt am Main, western Germany, June 11, ahead of the bank's meeting on the Eurozone's monetary policy. AFP-Yonhap
FRANKFURT, Germany — The European Central Bank on Thursday became the first major central bank to raise interest rates in response to the Iran war as policymakers around the world including new U.S. Federal Reserve Chair Kevin Warsh wrestle with how to confront the inflation fed by sharply higher oil prices.
The ECB’s rate-setting council raised its benchmark rate to 2.25 percent from 2 percent, where it had been for a year. The move comes ahead of rate-setting meetings next week at the Fed, the Bank of Japan and the Bank of England.
Oil prices have risen sharply due to Iran choking off the flow of crude oil through the Strait of Hormuz, the sea passage for a fifth of the world’s oil and fuel products during normal times. Raising rates aims to dampen the consumer price inflation fed by higher costs for products made from crude such as gasoline, diesel fuel, cooking gas and heating oil.
International benchmark Bent crude was trading just below $92 per barrel on Thursday, up from around $73 on the eve of the war. That has helped push inflation to 3.2 percent in May in the 21 countries that use the euro currency, above the ECB’s target of 2 percent.
